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Elections and QE2 Aside, Economic Data May be the Most Important Datapoint Not Yet Priced In

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This week, investors brace themselves for a tsunami of headline-making political and economic events: the midterm elections, the FOMC meeting and the latest employment report.

In fact, our own Todd Harrison, scribbling in today’s morning column, threw it down simply and powerfully: “Welcome to the most important week of the year,” he wrote.

But while the focus of the week will undoubtedly be on the elections and the FOMC meeting, says Miller Tabak’s Peter Boockvar, the results of both have already been priced in. The Fed in particular rarely wants to surprise the markets. Thus, the strategist says, the important factor of the week in moving markets may actually lie more with the economic data.

Indeed, the waves of such data started to roll in with some better-than-expected news about the manufacturing sector: the Institute for Supply Management said its manufacturing index rose 2.5 points to an October reading of 56.9. That reversed more the 1.9 point drop in index in September. Three of the five index components contributed to the gain, notes the crew at Nomura Global Economics, with 7.8 point increase in the important new orders index accounted for the biggest share.

Dennis Gartman, longtime editor of The Gartman Letter, likes what he hears: “[S]o long as it remains above 50 we will not become too concerned about the economy’s future prospects,” he writes. “Others may but we won’t… no until it’s fallen below 50; then we’ll ring bells and blow whistles calling attention to that fact and making the case for the onset of recession once again. For now, however, we are sanguine. We like sanguine.”

Investors also liked what they heard, selling govies and buying stocks this morning.
POSITION:  No positions in stocks mentioned.